As a homeowner, figuring out how to start the Loan Modification process can be confusing.
All the confusing and inaccurate data that is posted on the internet and spread around on the news is based on the understanding of writers and journalists that may not understand the Loan Modification process.
So how do you know when you’re getting the right information about Loan Modifications?
Simple, find someone who deals with loan modification, foreclosure and Short Sale clients on a regular basis.
The purpose of this article is to educate homeowners by addressing the facts and myths that seem to surround the ever elusive loan modification.
The following list should help demystify the most common misunderstandings surrounding the loan modification processes.
What are the Top 10 Myths about Loan Modifications?
Loan Modification Myth #1: My credit score is too low to qualify for a loan modification.
Unlike the option of negotiating a new loan, which requires you to re-apply, loan modification simply adjusts the terms and reduces the balance of an existing loan. Your credit score is much less of a factor in determining whether you qualify for a loan modification. Additionally, a successful loan modification may improve your credit score over time, especially if it prevents you from a foreclosure or bankruptcy.
Loan Modification Myth #2: It’s better to walk away or declare bankruptcy than to modify my loan.
Walking away from the home and filing for bankruptcy are certainly two options, but they aren’t necessarily the best options when you are facing foreclosure. If you walk away, the lender is unlikely to pursue legal action against you, but they could pursue a deficiency judgment against you to collect the difference between what they receive at auction and what you currently owe on the balance of the mortgage. Filing for bankruptcy may be better than just walking away, but it can negatively affect your credit history which makes it difficult to borrow money for 7 years.
Loan Modification Myth #3: Mortgage lenders would rather foreclose than modify your loan.
Mortgage lenders want to avoid foreclosure as much as you do. Foreclosure is a costly, time-consuming process for lenders. With declining house prices and the difficulty of selling real estate right now, a foreclosure more costly for lenders. Lenders don’t want your house; they want you to pay off your loan. If they understand that a loan modification will enable you to continue to make payments on your mortgage, they are likely to agree.
Loan Modification Myth #4: You have to be late on your payments to get a loan modification.
To obtain a mortgage loan modification, homeowners only need to prove that they are in danger of defaulting on their loan. If you have experienced a recent financial crisis, making you unable to pay your monthly mortgage payments in the future (such as divorce, loss or reduction in income, or medical bills due to illness or injury), then you may qualify for loan modification.
Loan Modification Myth #5: Contacting your lender directly is the best way to get a loan modification.
This is not necessarily untrue. You can certainly renegotiate you mortgage on your own. However, a Loan Modification Specialist who has experience in the real estate field is much more capable to negotiate the best deal possible. Experienced Loan Modification Specialists know what lenders are willing to negotiate and how far they can go, because they have worked with the lender and other lenders in the industry. With the threat of a possible law suit sitting at the negotiating table, the lender is usually more open to negotiating a reasonable deal.
Loan Modification Myth #6: A loan modification will hurt my credit.
It can depend on your lender and the type of modification you are asking for, but most loan adjustments should not damage your credit score. Modifications, like refinances, are not about borrowing more money so they usually don’t affect your credit. They could even help your credit if the renegotiation helps you to start making mortgage payments again. If a loan modification could hurt your credit, the impact would be far less than defaulting and having the bank foreclose on your home.
Loan Modification Myth #7: I’ve already received a foreclosure notice, so it’s too late.
If you have received a foreclosure notice from your lender you can still modify your home loan. As homeowners, you can request loan modification at almost any point during the foreclosure process. But you need to act quickly, because your window for options closes as time goes on. Lenders want to avoid foreclosure at almost any cost, so if they can turn a loan from a non-performing into a performing account, then they will be more willing to grant a loan modification.
Loan Modification Myth #8: If the lender doesn’t want to negotiate, it doesn’t have to.
Lenders often negotiate a solution with homeowners so that they have fewer bad loans on their books. If they accumulate too many bad loans, their reputation suffers, and they may have trouble borrowing money to make future loans. In addition, many loans that are in default contain evidence that the lender acted inappropriately when approving loans. In most cases, lenders are legally obligated to re-negotiate the loan agreement with the homeowner.
Loan Modification Myth #9: If I do not qualify for a loan modification, I will lose my home.
Not everyone qualifies for a loan modification, but most homeowners have more than 10 options they can pursue to either keep their home or get out from under it. These include placing the your home on the market for a Short Sale, refinancing out of trouble, borrowing money to reinstate the loan, and working out a payment plan with the bank (forbearance), to name a few. You even have the option of buying back the property from whoever happens to purchase it at the auction. Just contact a real estate professional to discuss your options.
Loan Modification Myth #10: I can only apply for a loan modification on my primary residence.
Loan modification is designed for homeowners, not real estate investors, so you have a better chance of negotiating a loan modification for your primary or secondary residence – that is, for a home you actually live in rather than an investment property. However, the mortgage lending industry cannot afford to have any more loans go into default. Lenders will even work with investors to renegotiate their loan agreements.
Getting the right information about loan modification is important. As a homeowner you should should know that lenders want to avoid foreclosure, and be sure you do everything you can to stay eligible for a loan modification.
The best thing you can do is contact a Short Sale or Loan Modification Specialist to help you explore all of your option early.
Remember, regulations change all the time so make sure you get the right person to do your research.
The real estate landscape is constantly changing, and only by consulting a specialist with knowledge in the field of loan modifications can you truly help you make the best decision for your future.
If you’re not sure where to start or what to do about the loan modification process, give me a call. I’ll help you go over your options and get you started on the path that’s right for you.
Sincerely,
Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CAÂ 90807
follow my story at http://markshandrow.com
